Profile

26 February 2015

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Photography by Colin Beere

THE

QUIETCOMPETITOR

Zhu Jiandi, Managing Partner and Chairman of the Board of BDO China Shu Lun Pan CPAs, explains to Ben Kwok how the firm is able to rise to be the No. 4 firm in China by revenue

Could Zhu Jiandi be one of the best-known Mainland accountants in Hong Kong? It cer-tainly seemed that way on a recent

chilly Saturday morning in Sheung Wan, when the visiting Managing Partner and Chairman of the Board of BDO China Shu Lun Pan CPAs dropped by the offices of the firm’s Hong Kong counterpart.

The occasion was Zhu’s first official board meeting of BDO Hong Kong and it seemed everyone sought his attention. In-deed, he wasted no time even while posing for photographs, signing papers as he stood.

Zhu is softly spoken and serious, with a mien that radiates trust, which, he points out, was the fundamental philosophy of his original firm, Shu Lun Pan, where he started and worked for 27 years.

During a 40-minute interview in Puton-ghua, his most frequently uttered expres-sion was an English one – “IPO”. That might be a sign of how quickly the Shanghai-based Zhu has adjusted to the English-peppered conversation found in Hong Kong. However, it also might indicate where the future pros-perity of the firm lies.

Zhu has been on a whistle-stop tour of several Mainland cities and Hong Kong to orchestrate financing deals and facilitate access to capital for Mainland companies that are rapidly expanding overseas. “Ac-counting firms are instrumental in the role of helping Mainland enterprises to step out into the world, especially given the process of yuan internationalization and the inau-guration of the Shanghai-Hong Kong Stock Connect programme,” says Zhu.

Despite its mid-tier status globally out-side the Big Four, BDO China is the No. 1 firm in the country in terms of revenues from advisory work on initial public offer-ings, a major source of capital for ambitious Mainland companies. Zhu’s aim is to put BDO China on the global accounting map, and the first challenge, he argues, is to outdo the Big Four firms in the Mainland. “Every year we aim for a breakthrough and

manage to narrow the gap with the interna-tional Big Four, step by step.”

As well as IPOs in China, BDO also tops the list in terms of corporate reorganiza-tion and restructuring, and other activities, which explains why it had a higher revenue ranking than half of the Big Four. Part of its strength lies in its client roster of state-owned enterprises, which include such blue chips as PetroChina Company, China Na-tional Offshore Oil Corporation, Aluminum Corporation of China, Shenhua Group and China South Locomotive and Rolling Stock Corporation.

Climbing the leagueBDO China was the No. 4 accounting firm in the country by total revenues, with its 2.51 billion yuan total lagging behind only PwC China (3.35 billion yuan), Deloitte China (2.88 billion yuan) and Ruihua, an

affiliate of both Crowe Horwath and RSM (2.77 billion yuan), according to the latest annual rankings issued in June 2014 by the Chinese Institute of CPAs.

That report card reflects the consistent improvement of BDO’s fortunes in China. It was a distant No. 5 firm back in 2009 be-fore it took over an 80-year-old accounting firm founded by Shu Lun Pan, also known as Pan Xulun, an accountant educated in the United States who is considered the father of modern Chinese accounting. Af-ter that merger BDO China saw its revenue double overnight and the firm continued to expand keenly since then, buying the PKF China affiliate in 2012 and most recent-ly taking a stake in BDO Hong Kong. BDO Hong Kong is a group of companies provid-ing accountancy, advisory and business services in Hong Kong. A separate entity registered with the Institute, BDO Limited,

28 February 2015

Profile

Zhu says Hong Kong has a special role to play in China’s development. Its position as a gateway city will facilitate Mainland enterprises in undertaking the “going out” strategy formulated by the Chinese govern-ment in 1999 to look for international busi-ness opportunities. Hong Kong, Zhu adds, also has a role in deepening state-owned en-terprises’ restructuring to achieve efficiency and better corporate governance.

“We see Mainland China and Hong Kong opening up to full-scale cooperation,” says Zhu. “Hong Kong has for a long time been a window for China to the world. Because of this unique economic edge, Mainland enter-prises can utilize the Hong Kong service in-dustry to gain an internationalized platform.”

Taking advantage of its strength in capi-tal markets, BDO has already provided ser-vices to assist some of China’s largest cor-porate entities, whether SOEs or privately owned companies, including financial in-stitutions, to set up in Hong Kong.

Through this, says Zhu, BDO can help Mainland com-panies extend their operations to overseas and, in doing so, drive value and enhance their innovation ca-pabilities. “We expect more Mainland enter-prises to lever-age the Hong Kong capital market to fulfil their dreams of rapid growth,” he says.

Close partnershipZhu said the closer relationships between the Hong Kong and Mainland economies encouraged the synergy of the two BDO firms. The goal, he adds, is “to fully capture a

newly emerged opportunity, and strengthen the group’s international network by com-bining the best available business and advi-sory skills to provide seamless service.”

Just as Hong Kong and China have grown closer, says Zhu, the two firms will be able to better align their corporate culture and management philosophy. “Under one big family, the relationship between China and Hong Kong has returned to its innate closeness.” In addition, Zhu notes, the two accounting firms have an important simi-larities, especially their substantial client rosters of listed companies in both the Hong Kong and Mainland stock exchanges. “As our synergy develops, we will feel comfort-able in handing over substantial corporate accounts to our Hong Kong office,” he says.

Zhu says the Mainland operation can leverage its relationship with BDO Hong Kong to build on its ranking as the largest provider of advisory services to SOEs. “I believe that within three years, BDO China will fully develop the potential of the Hong Kong business.”

Not only will more Chinese companies come to Hong Kong for listing, Zhu sees many potential opportunities for Hong Kong companies looking for a listing in Shanghai and Shenzhen as the A share mar-ket becomes more internationalized. “We will gradually lay down a strong foundation in the Greater China region and interaction between the China and Hong Kong securi-ties market.”

Win-win solutionsZhu sees the contrasts of Hong Kong and the Mainland – a small but developed economy with great infrastructure and highly edu-cated professional services talent compared with a vast emerging market with rapid but uneven growth – reflected in the relation-ship between the BDO firms. As a result, says Zhu, “Both working together should contribute to a win-win for all.”

Zhu has ridden China’s high-speed train of economic growth ever since then leader Deng Xiaoping gradually opened the coun-

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is engaged in provid-ing auditing services in Hong Kong.

That investment agreement, made in September 2014 and in conjunction with BDO International, came into effect on 1 January this year and is a first step towards the operational syner-gy of BDO Hong Kong and BDO China. At the time, Zhu said it would result in a combination of BDO China’s “local market knowledge, industry expertise and technical skills” with BDO Hong Kong’s “world class ser-vices, and the expertise of BDO’s robust and extensive network.”

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“ Accounting firms are instrumental in the role of helping Mainland enterprises to step out into the world, especially given the process of yuan internationalization and the inauguration of the Shanghai-Hong Kong Stock Connect.”

try’s doors from 1978, and has witnessed first-hand the transformation of small Mainland accounting firms, which had struggled to survive in an environment that was dominated by the Big Four, into several home-grown professional services champi-ons able to compete with international net-works.

“Western accounting had been develop-ing for nearly 100 years before its adoption by the Chinese, and that explains why the Big Four has an absolute advantage over their Mainland accounting counterparts,” said Zhu, noting that the Big Four still dom-inates in the Mainland’s financial services, banking and insurance sectors.

In 2000, BDO China became the first Mainland accounting firm to incorporate through a limited liability partnership. It now signs off on more auditors’ reports for listed companies than any other firm in China. “China’s economy has seen strong growth over the past 20 years and its unique

development model has enabled local firms to catch up with a once-in-a-lifetime oppor-tunity and ride with the Chinese economy as a relatively independent entity largely un-affected by Western economies,” says Zhu.

Zhu’s own career began when he gradu-ated from Shanghai Lixin University of Com-merce (also founded by Pan, the accounting pioneer). He chose to practise rather than teach accounting in the late 1980s when he had no more than 20 accountant colleagues at the Shu Lun Pan accounting office, then known as Lixin. The firm has grown to more

than 7,200 employees, of whom 1,800 are CPAs, in 29 cities, including Shanghai, Bei-jing and Shenzhen.

Audit work accounts for about 70 percent of its revenue but Zhu sees the mix gradually shifting towards more non-audit activities such as advisory in the years to come. Look-ing forward to 2015, Zhu says that BDO China would pursue organic growth as well as eyeing merger and acquisition opportu-nities governed by the philosophy that “sta-bility comes first.”

Zhu says trust would continue to be the firm’s hallmark. He quotes Confucius’s assertion from the Analects, noting that “if the people have no faith in their rulers, there is no standing for the state” applies equally to companies and their clients. As Zhu racks up miles between Shanghai and Hong Kong, he will put that statement to the test as he seeks to see the China and Hong Kong operations of BDO work more closely together.

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“ Western accounting had been developing for nearly 100 years before its adoption by the Chinese.”